3 Models That VCs Are Buying in Local Tech

Venture investment continues to pour into local tech, but tastes are changing. During a panel at Street Fight Summit West on Tuesday, Jared Fliesler (General Partner, Matrix Partners), Jim Scheinman (Founder, Maven Ventures) and Raj Kapoor (CEO, Fitmob) spoke about where the hyperlocal industry is heading and where they expect the next billion-dollar local startup idea to come from.

At Maven Ventures, Scheinman says its still all about scale. He expects those in the food and weather space, in particular, to be poised for growth in the coming years “I may be unique in my investment style. The first thing I look for is whether there is a vision that’s worth fighting for?” Scheinman said. “Is this solving a consumer problem?”

For Fliesler, who joined Matrix Ventures after a stint at Square, its about enabling immediacy. With services like Google Shopping Express bringing products and services to consumers’ doorsteps, next-day delivery services from ecommerce companies like Amazon are quickly becoming obsolete. As people become less patient, they’ll become less and less willing to wait for things like coffee or groceries. As a result, Fliesler expects to see companies in the same-day delivery marketplace flourish.

All three panelists agreed that monetization can wait when it comes to developing and cultivating growth in a local startup. Although Scheinman said he never invests in a company where he doesn’t think there’s a clear path to revenue, he also doesn’t think entrepreneurs should focus too heavily on revenue early on.

When posed with the question of where the next billion-dollar local idea will come from, each panelist had his own perspective. Here are three ideas from the group.

Scheinman sees food as an under-utilized vertical within local, and says existing models are missing a home-cooked component. He envisions a marketplace where neighbors would cook for one another. Not only could a marketplace offering home cooked meals cut down on the obesity epidemic, but it could also bring neighbors closer together.

Sharing under-utilized assets was another concept batted around by the group. Empty seats in a car, leftover portions from a family dinner, and extra space in a garage are just three examples of under-utilized assets that consumers could sell or share through local marketplaces. The selling or sharing of under-utilized assets represents a resurgence of things meant to bring communities back together — something that all three panelists agreed was a trend within the local space.

Startups that decrease friction in the online buying process will flourish in the coming years, according to Fliesler. Pointing to businesses like Polyvore, Threadsy, and Poshmark, Fliesler said startups that focus on women’s wardrobes are fulfilling a pent up demand in the marketplace. There was a time when shoppers had to physically drive to shopping malls to purchase the things they saw in magazines. Now, they can click “Buy Now” buttons and get free delivery right away. As the friction in online purchasing continues to decrease, Fliesler said it will be interesting to see how much people increasingly engage in online commerce.

1) There’s a big opportunity around “personal CRM” – that is, “if Macy’s knew as much about you as Amazon did, imagine how that would change your shopping experience in retail, and how that’d make Macy’s even more successful/profitable” (e.g., “40% of amazons sales is derived from recommendations”).

2) The question is not about getting or creating hyperlocal content, its about getting “high-quality hyperlocal content really cheaply.” Patch was described as an example of expensive content with debatable quality.

3) Pure content plays are not interesting investments and those kinds of businesses are “extremely hard” unless its feeding some other engine, like an ad engine or providing some kind of intelligence.

Brad Cooper

Good summary, Ben. Agree with all three.

Anthony Ire

Hired..

Anthony Ire

Yes Ben, an engine with some kind of intelligence wouldn’t malfunction often and operate smoothly..